Blanding Company Issues $1 000 000 of 8%, 10- Year

question 98

Multiple Choice

Blanding Company issues $1 000 000 of 8%, 10- year debentures at 98 on 28 February 2014. The debenture pays interest on 28 February and 31 August. The market rate of interest on the issue date was 10%. Assume Blanding uses the straight- line method for amortisation. The interest accrual entry at 31 December 2014 would include:

• A)no entry at 31 December 2014.
• B)a credit to Cash of $26 667.
• C)a debit to Interest expense $26 667.
• D)a credit to Interest payable of $26 667.

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Definitions:

Glycogen

An excess of glucose that is stored in the liver and in skeletal muscle.

Carbohydrates

Essential nutrients found in sugars, starches, and fibers that provide energy to the body’s cells, tissues, and organs.

Calorie

A unit used to measure the amount of energy food produces; the amount of energy needed to raise the temperature of 1 kg of water by 1°C.

Calories

Units of energy that measure the amount of energy food provides to the body.